US goods trade deficit narrows; global flow of goods improving

[WASHINGTON] The United States' trade deficit in goods fell sharply in June as exports rebounded following several months of decline, suggesting a recovery in global trade after being severely disrupted by the Covid-19 pandemic.

The shrinking goods trade gap reported by the Commerce Department on Wednesday did not change expectations that the economy contracted at its steepest pace since the Great Depression in the second quarter because of the coronavirus.

The goods trade deficit dropped 6.1 per cent to US$70.6 billion last month. Exports of goods accelerated 13.9 per cent to US$102.3 billion, eclipsing a 4.8 per cent increase in goods imports to US$173.2 billion. Goods imports fell in May to their lowest level since July 2010.

The rebound in exports was led by a 144.1 per cent surge in shipments of motor vehicles and parts. Exports of capital goods soared 11.0 per cent and consumer goods jumped 12.6 per cent. There were also increases in exports of industrial supplies and other goods, but shipments of food, feeds and beverages fell.

Imports of motor vehicles and parts accelerated 107.7 per cent last month. There were also strong gains in imports of capital and consumer goods. Imports of industrial supplies, however, fell.

Though the smaller goods trade deficit is a boost in the calculation of gross domestic product, it was offset by continued decreases in retail and wholesale inventories. Prior declines in imports forced businesses to draw down inventories.

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The government is scheduled on Thursday to publish its snapshot of second-quarter GDP. According to a Reuters survey of economists, GDP probably contracted at a 34.1 per cent annualised rate last quarter, the sharpest drop in output since record keeping started in 1947. The economy contracted 5 per cent in the January-March quarter. It entered recession in February.

The Commerce Department also reported on Wednesday that retail inventories dropped 2.6 per cent in June after decreasing 6.2 per cent in May. Motor vehicle and parts inventories tumbled 6.5 per cent.

Retail inventories, excluding motor vehicles and parts, the component that goes into the calculation of GDP, fell 0.8 per cent after dropping 1.7 per cent in May. Wholesale inventories fell 2.0 per cent in June after sliding 1.2 per cent in the prior month.

REUTERS